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New Imported Inputs, New Domestic Products

Italo Colantone () and Rosario Crino ()

No 312, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: We study the effects of new imported inputs on the entry of new domestic products and their characteristics. To this purpose, we construct a novel, comprehensive and extremely detailed dataset, which contains product-level information on foreign trade and domestic production for 25 EU countries over 1995-2007. Using these data, we identify new domestic goods and new imported inputs, controlling for all changes in commodity classifications over time. We then show that new imported inputs substantially boost the introduction of new domestic products. We also show that this effect is directly proportional to the quality of new imported inputs and inversely related to their price (conditional on quality). Finally, we document that new products are characterized by higher prices and higher quality relative to existing goods, and that such premia are larger the greater is the use of new imported inputs in production.

Keywords: New Intermediate Inputs; Product Innovation; Input and Output Prices; Input (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-int
Date: 2011-09-06
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Journal Article: New imported inputs, new domestic products (2014) Downloads
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